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Diamond Industry - Essay Example

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Diamond Industry

The hallmark of the trade of gem diamonds is its remarkable concentration; that is, diamond cutting and wholesale trade is limited to few locations. This paper will outline the PESTLE that stands for political, economic, social, technological, legal and
The cartel, which is the character of the diamond industry, has created a barrier to entry in the diamond industry. Taking this step has made it impossible for new entrants into the diamond industry. According to Greenhalgh (2005, p. 105), the changes experienced in the industry has led to the rise of three major diamond companies such as Alrosa, RTD and BHPB . The changes involve the discovery of other diamond fields in countries that De Beers no longer have control and the political disorders taking place in the diamond producing countries which are still developing. The dynamic trend in the industry has made it possible for junior companies to rise. To enable the industry have a bigger share in the industry, there has been merging and acquisition for junior companies in the past few years. In addition, the strategy laid by Australia of operating in the niche market, such as rare-high priced and colored gems, without hurting the industry leader, has opened aspects of the industry that were not easily accessible.
Unlike other industries, the structure of diamond industry does not does not grant the buyers the bargaining power. Over the years, the denied bargaining power has been the trend in the industry. In return the the global economic crisis has hit the industry causing a fall in demand for diamond. With the fall in demand, it meant that there could be an oversupply and a reduction in price. To control this, De Beers ordered for a reduction in diamond production. However, De Beers and other mines including those in Canada stopped the production to as a result of the economic crisis. As a result, there was a low supply for diamonds with increasing demands in other markets such ...Show more

Summary

Gem diamonds are primarily mined in Russia, South Africa, Namibia and Australia. It takes about 250 tons of mined ore to produce a carat of finished…
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